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    Cabinet approves launch of Bharat Bond ETF

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    Cabinet approves launch of Bharat Bond ETF

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    The Union Cabinet on Wednesday has cleared the creation of an umbrella bond exchange-traded fund, said finance minister Nirmala Sitharaman.

    The Union Cabinet on Wednesday has cleared the launch of an umbrella bond exchange-traded fund, said finance minister Nirmala Sitharaman.
    Bharat Bond ETF would be first corporate bond ETF and will provide additional funding for public sector units and other government organisations, said Sitharaman.
    Bond ETFs are passive funds which are traded on the exchange ad invest in bonds just like conventional bond mutual funds. But, unlike their more-traditional counterparts, bond ETFs are more liquid, transparent and cheaper.
    The Bharat Bond ETF will be a basket of bonds issued by state firms or any government organisation, and bonds will be tradable on the exchange, said Sitharaman.
    The unit size will be of Rs 1,000, allowing small investors to invest. Each ETF to have a fixed maturity date and will track underlying index on risk replication basis, she said. The bond ETF will have two maturity series—3 and 10 years.
    Radhika Gupta, CEO, Edelweiss Asset Management, said, "We are very excited with the cabinet approval of Bharat Bond ETF and very excited to bring it to the market soon."
    It is a product meant to bring transparency and liquidity into the bond market and it would also give retail investors access to a very diversified basket of CPSEs, she added.
    According to Gupta, public financial institutions or other government bodies could be among the CPSEs that would be included in the ETF. They are high-rated CPSEs so it comes with the safety that comes with a CPSE, she said.
    Gupta explained that the ETF will be taxed like a debt mutual fund and over three years you will have the benefit of capital gains with indexation. "If I compare it with an instrument like FD, which is taxed at a marginal rate, this will be taxed at 20 percent with the benefit of indexation.
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